Wool prices in Australia have increased by over 30 per cent since September as Chinese processors boosted purchases to meet an expected jump in apparel demand after a coronavirus-related slump. According to Robert Hermann, Managing Director, Mecardo, wool mills and manufacturers have prepared for an anticipated increase in consumer spending after pandemic lockdowns. The benchmark Eastern Market Indicator wool price had slumped by 47 per cent in Australian dollar terms to A$8.58 per kilogram between the first week of auctions in January and the first week of September, as demand shriveled due to global Covid-19 lockdowns.
Australia typically exports about 80 per cent of its greasy, or untreated, wool to China. However, this figure surged to 96 per cent in the June quarter, amid COVID-19-related disruption in export markets, particularly in Europe, said Abares, a government forecaster. Still, the prospect of strict COVID-related lockdowns in the EU and consequently lower apparel sales are likely to limit price upside, said Dennis Voznesenski, Rabobank associate analyst, in the bank’s October agribusiness report.
Though further lockdowns in Europe would be negative in the short term, pent up consumer demand should cause the market to rebound strongly after restrictions ease, added Herrmann.